China urges IMF to give more power to emerging markets

Reuters

BEIJING - China called on the IMF on Wednesday to stick to a commitment to give emerging markets more power at the world body after U.S. lawmakers set back historic reforms that would give developing countries a greater say.

The remarks by Chinese Foreign Ministry spokesman Hong Lei were an indirect criticism of the United States, the biggest and most powerful IMF member, where lawmakers failed on Monday to agree on key funding measures, though Hong did not mention the United States by name.

The proposed $1 trillion spending bill for the U.S. federal government did not include funding for the International Monetary Fund.

Congress must sign off on the IMF funding to complete 2010 reforms that would make China the IMF's third-largest member and revamp the IMF board to reduce the dominance of Western Europe.

The changes would also give greater say to nations such as Brazil and India to reflect their growing economic heft.

But the changes have been held up by the lack of approval from the United States.

"The IMF quotas reform is an important decision made by the organisation," Hong said at a daily news briefing.

"The relevant organisation's members should earnestly implement the decision, and honour and enhance the voice and representation of developing countries within the IMF."

The reform of the voting shares, known as quotas, cannot proceed without the United States, which holds the only controlling share of IMF votes.

After putting off the request in 2012 because of the U.S. presidential election, the U.S. Treasury has sought to tuck the provision into several bills since March.

The administration's requests, however, have been met with scepticism from some Republicans, who see them as tantamount to approving fresh funding in a tight budget environment.

Some lawmakers have also raised concerns about how well the IMF is helping struggling economies in Europe and the risks attached to IMF loans, suggesting Congress is in no hurry to approve any changes

India's Finance Ministry did not immediately respond to requests for comment. But an official at the ministry, who has been dealing with multilateral institutions including the IMF, said India was "disappointed" at the Congress lack of action.

The official declined to be identified because he was not authorised to talk to the media.

A South Korean Finance Ministry official, who declined to be identified, said: "While we appreciate the U.S. government's efforts, we regret the fact that the proposed funding measure fell through in Congress at the last minute.

"IMF quota reform is an important matter to address and we hope that the matter will be discussed at the G-20 level with the end-January deadline approaching."

Developing nations have longed viewed the IMF with suspicion for promoting disastrous privatisations that complicated the transition from communism for some emerging nations in the early 1990s, and for pushing budget cuts that exacerbated debt crises in Asia and Latin America a few years later.

That suspicion has been compounded by a power structure that dates to IMF's founding in 1944. The structure was shaped by the victors of World War Two - the United States and Europe. (Reporting by Sui-Lee Wee in Beijing, Frank Jack Daniel in New Delhi and Vincent Lee in Seoul; Editing by Nick Macfie)